Top Ten Investment Tips

Investing Part III: So You Still Want to Invest?

We have discussed how to open up an investment account and you know the dangers of the margin account. Now you're probably asking yourself, "What's next?" The best way for you to choose your investment vehicles is to first plan out how much money you want to invest, how much you can afford to lose, how much you want to sleep, and how long you want to invest for. How do you answer all these questions? By considering the following tips.

top 10 tips

1. Diversify The expression, "don't put all your eggs in one basket" is meaningful when it comes to money investing. Don't put all your money in one stock. Also, buy fixed income securities (i.e. bonds) and stocks. Don't pick only one type of investment.

2. Do Your Homework Obtain and analyze as much information as possible before making your investment decisions. This will alert you of any problems a company may have, or what to expect from your investment.

3. Set Goals & Limits Determine the price (high target price or low stop-loss price) at which you're willing to sell. Analyze interest rates to decide what return you want.

4. Don't Gamble With Money You Can't Afford To Lose The less you can afford a loss, the more conservative you should be in your choice of investments.

5. Don't Be Greedy Don't expect your broker to recommend stocks that will double in value within a few months. If you do have a stock that goes up considerably — i.e. 50% or more — sell.

6. Invest For The Long-Term Company stock prices will fluctuate, sometimes unfavourably, in the short-term. Invest for the long-term, but keep your current financial needs in mind. You never know when you might need some of that money.

7. Avoid Acting On Impulse An impulse buy, whether at the mall or on the stock market, is still an impulse buy. Stick to your plan. Don't buy a stock on a hot rumor; you'll get burned 90% of the time.

8. Go For Value Undervalued stocks will help create the most growth in your portfolio. Look for bonds of companies that are out of favor too. They should be selling at a deep discount.

10. Get Professional Help If you're starting out, hire the best professional help you can afford. Professional advice will likely pay for itself within a short period of time. Once you become used to the market, do the research yourself. Later on in the game, switch to an online broker.

TRIVIA OF THE WEEK Which chemical company makes Styrofoam-brand insulation? (Hint No. 1: it recently announced a merger with another chemical company. Hint No. 2: part of its name is similar to a financial index)... Name that company. The Answer Is...